The Pension Fund Regulatory and Development Authority (PFRDA) has recently issued a new order regarding National Pension System (NPS) withdrawals, according to which customers of all government sectors will have to submit their application for partial withdrawal through their associated nodal offices. This includes subscribers from central/state government and central/state autonomous bodies. The same will be applicable from January 1, 2023.
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In simple words, this means that the said subscribers will have to submit supporting documents now to substantiate the reasons for partial withdrawal.
The earlier circular and what stands changed
In the wake of the COVID-19 pandemic, the pension regulator, in January 2021, had allowed NPS subscribers to request a partial withdrawal online through self-declaration and documents were not required to be submitted. With the abating of pandemic-related difficulties and relaxation of lockdown restrictions, PFRDA said that the online partial withdrawal facility from NPS through self-declaration will no longer be available for government sector subscribers.
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PFRDA earlier issued the circular on partial withdrawals under NPS through self-declaration for the benefit of subscribers as a special dispensation to cope with the COVID-19 pandemic to protect the subscribers' interest and ease the burden of nodal officers, including POPs, from verification and authorization. The circular also provided the option of submission of the partial withdrawal requests by the subscribers through their nodal office/POPs as per the prevalent practice. Now, the same will be withdrawn from next year.
However, the partial withdrawal facility through the self-declaration process will remain available for voluntary non-government NPS subscribers.
About NPS
NPS, as we know, is a government-run investment scheme that gives the subscriber the option to set the preferred allocation to different asset classes. It offers two kinds of accounts — Tier 1 and Tier 2 — for instruments including government bonds, equity market and corporate debt.
While the Tier 1 NPS account is strictly a pension account, the Tier 2 account — known as an investment account — is a voluntary saving account associated with the Permanent Retirement Account Number (PRAN).
Conditions for premature withdrawal
NPS allows investors to prematurely withdraw only after the completion of three years, where the withdrawal amount cannot exceed 25 percent of contributions made by the subscribers.
Withdrawal is allowed only for specified reasons, for example—higher education of children, the marriage of children, the purchase/construction of a residential house (in specified conditions) and for treatment of critical illnesses.
The subscribers can make a partial withdrawal a maximum of three times during the entire tenure of subscription under NPS. The partial withdrawal request can be initiated online by the subscriber.
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